Archive - Nov 2013

Gold bullion and pensions are a powerful combination. Pensions are extremely tax efficient investment structures that have been ignored by the general public for too long despite being very easy to set up.

It's official - goodbye Gary Gensler, we hardly knew you... as a commodities regulator that is, although Bart Chilton (who is finally also stepping down due to being too burdened by lack of funding to actually do anything) was kind enough to provide much needed perspective on how the CFTC truly works. In place of the former Goldmanite, today Obama will announce that going forward America's top derivative regulator and CFTC head will be Timothy Massad, the Treasury Department official responsible for overseeing the U.S. rescue of banks and automakers after the credit crisis.

Despite ongoing optimism that the housing recovery can withstand fire, brimstone, rising rates, and collapsing confidence (in spite of the fact that indications from most top-down data are to the contrary), investors in US homebuilders may need to adjust this morning. If DR Horton is any indication of a broad trend (and empirical comparisons with its peers show that it is) then the firm's huge miss in its cancellation rate (31.0% vs an expectation of 25.5%) in Q3 should be food for thought. The surge in cancellation was the largest MoM since mid-2008 and jumped to its highest since December 2008.

When it comes to Twitter, there seems to be a discrepancy in the publicly available user data. Recall that according to the company's S-1 filing, Twitter's US monthly user base has risen from 10 million in 2010 to just shy of 50 million. And yet, according to a just released Pew Research poll, a whopping 84% of the US adults were not Twitter users, and perhaps more importantly, of the 16% of adult users, half admitted to using Twitter for news. Narrowing this down even further, close to half, or 45%, of Twitter news consumers were under 30, which implies that roughly 4% of American adults use Twitter as something more than just a place to vent occasionally, and actually have a productive use for the service. So in attempting to reconcile the two vastly differing sets of numbers: one from the company and one from Pew, one wonders: is Twitter merely the latest platform for "socializing" teens who unfortunately for Twitter's advertisers (who between Google, Facebook, Pinterest, Yahoo and so on, seem to have infinite advertising budgets) don't have access to a credit card? And what happens when, just like FaceBook, Twitter's coolness factor disappears and only the hardcore, and quite paltry, news users remain?

In yet another miracle of modern-day macroeconomics, despite the soaring stock market and better-than-expected government-provided data (soft surveys mostly), the small-business (supposedly the core driver of jobs and growth in the US economy) saw optimism collapse at the fastest rate since Sandy (supposedly due to the government shutdown). This is the fifth month in a row that NFIB optimism has missed expectations (the worst - absent Sandy - since March 2012). 7 of the 10 sub-components were negative with the biggest plunge coming from those who expect the economy to improve. Seems like another good reason to BTFATH...

You pack of fringe Zero Hedge low brows!

With the numbers of 'real' enrollees in Obamacare looking dismal relative to government expectations, and the deadline for the first official details of the health law's enrollment figures due later this week, the administration has decided - in an oh so US Government-esque move - to change the rules. An enrollee is now defined as people who have purchased a plan (normal health insurance plan protocol) as well as those who have a plan sitting in their online shopping cart but have not yet paid. As The Washington Post notes, the disparity in the numbers is likely to further inflame the political fight especially in light of the fact that - for context - the average e-commerce shopping cart abandonment rate is 67%.

A central tenet of propaganda is that the Big Lie repeated often enough is accepted with greater ease than small lies. Thus it is no surprise that the leadership and propaganda organs of the Fed, Federal government and the Keynesian cargo Cult of fellow travelers all repeat our era's Big Lie: There is a free lunch after all. There are two free lunches, according to our financial and political leaders: free money, in the form of money created out of thin air by the Fed, and almost-free money borrowed into existence by the Federal government. The problem with Big Lies is reality has not been disappeared; it still exists. Actions create consequences, and not necessarily the consequences that were planned or expected.

A few hours ago, the "historic" and "most important ever" (just like ever payrolls report) Chinese plenum concluded. And like everything out of China, it was big on promises and scant on details. Among the numerous assurances of reform, the plenum promised: to deepen reform of the medical system and in the education sector, to speed up free trade zone development, to clear barrier in markets, to deepen national defense and military reform, to reform the income distribution system, reiterated the main role of public ownership and said there would be reform of government-market relations. And all of this would yield results by 2020. Essentially, words so hollow one can't help but doubt this was merely the latest smokescreen to justify the perpetuation of the status quo, investment-based economy which as the BBG Brief chart below shows, instead of becoming more consumption driven which is what China has been feverishly attempting to achieve, has instead become ever more reliant on consumption.

The EU may have many worries and woes that are slapping it around its face right now (and it could be said for a number of years), but there is one thing that is worrying economists more than the sovereign-debt crisis and that’s the fact that prices are not increasing enough.

If you have not already, it is time to modify your UST trading strategy to adapt to current market conditions.  Buyer beware...

• China Pledges Greater Role for Market in Economy (WSJ), China vows 'decisive' role for markets, results by 2020 (Reuters)
• China expected to cut growth target to 7% (FT)
• World Trade Center Tower Debuts in Manhattan Leasing Test (BBG)
• Job Gap Widens in Uneven Recovery (WSJ)
• Khamenei’s conglomerate thrived as sanctions squeezed Iran (Reuters)
• Swiss referendum on wages of high earners stirs debate (FT)
• Obama to Nominate Massad to Head CFTC (WSJ)
• Japan readies additional $30 billion for Fukushima clean-up (Reuters)
• Target Fills Its Cart With Amazon Ideas (WSJ)
• Shadow banks reap Fed rate reward (FT)

Following a brief hiatus for the Veterans Day holiday, the spotlight will again shine on treasuries and emerging markets today. The theme of higher US yields and USD strength continue to play out in Asian trading. 10yr UST yields are drifting upwards, adding 3bp to take the 10yr treasury yield to 2.78% in Japanese trading: a near-two month high and just 22 bps away from that critical 3% barrier that crippled the Fed's tapering ambitions last time. Recall that 10yr yields added +15bp in its last US trading session on Friday, which was its weakest one day performance in yield terms since July. USD strength is the other theme in Asian trading this morning, which is driving USDJPY (+0.4%) higher, together with EM crosses including the USDIDR (+0.6%) and USDINR (+0.6%). EURUSD is a touch weaker following a headline by Dow Jones this morning that the Draghi is concerned about the possibility of deflation in the euro zone although he will dispute that publicly, citing Germany’s Frankfurter Allgemeine Zeitung who source an unnamed ECB insider. The headline follows a number of similar stories in the FT and Bloomberg in recent days suggesting a split in the ECB’s governing council.

"I can only say: I'm sorry, America. As a former Federal Reserve official, I was responsible for executing the centerpiece program of the Fed's first plunge into the bond-buying experiment known as quantitative easing.... We were working feverishly to preserve the impression that the Fed knew what it was doing...  The central bank continues to spin QE as a tool for helping Main Street. But I've come to recognize the program for what it really is: the greatest backdoor Wall Street bailout of all time....  Having racked up hundreds of billions of dollars in opaque Fed subsidies, U.S. banks have seen their collective stock price triple since March 2009. The biggest ones have only become more of a cartel: 0.2% of them now control more than 70% of the U.S. bank assets.  As for the rest of America, good luck..... The implication is that the Fed is dutifully compensating for the rest of Washington's dysfunction. But the Fed is at the center of that dysfunction. Case in point: It has allowed QE to become Wall Street's new "too big to fail" policy."

"U.S. objectives for world monetary system—a durable, stable system, with the SDR as a strong reserve asset at its center — are incompatible with a continued important role for gold as a reserve asset.... It is the U.S. concern that any substantial increase now in the price at which official gold transactions are made would strengthen the position of gold in the system, and cripple the SDR... Countries could give up their gold holdings to the IMF in exchange for SDRs. The gold could then be sold gradually, over time, by the IMF to the private market.... There is a belief among certain Europeans that a higher price of gold for settlement purposes would facilitate financing of oil imports... From the Arab point of view [gold] would have the advantages of being protected from exchange-rate changes and inflation, and subject to absolute national control. "